Judges: THOMAS C. OLDHAM
Agency: Department of Revenue
Latest Update: Apr. 28, 1977
Summary: Petitioner's alleged liability for documentary stamp tax, penalty, and interest, as set forth in Respondent's Proposed Notice of Assessment (Revised Assessment #2), dated September 22, 1976.Tax land on face value, not on amount paid by Petitioner at bankruptcy sale.
76-1918.PDFSTATE OF FLORIDA
DIVISION OF ADMINISTRATIVE HEARINGS
SHERIDAN VENTURES, INC., )
)
Petitioner, )
)
vs. ) CASE NO. 76-1918
)
DEPARTMENT OF REVENUE, )
STATE OF FLORIDA, )
)
Respondent. )
)
RECOMMENDED ORDER
A hearing was held in the above-captioned matter, after due notice, at Fort Lauderdale, Florida, On March 28, 1977, before the undersigned Hearing Officer.
APPEARANCES
For Petitioner: Brian C. Deuschle, Esquire
Spear, Deuschle and Curran, P.A. 5554 North Federal Highway
Ft. Lauderdale, Florida 33308
For Respondent: Edwin J. Stacker, Esquire
Assistant Attorney General Department of Legal Affairs The Capitol
Tallahassee, Florida 32304 ISSUE PRESENTED
Petitioner's alleged liability for documentary stamp tax, penalty, and interest, as set forth in Respondent's Proposed Notice of Assessment (Revised Assessment #2), dated September 22, 1976.
FINDINGS OF FACT
Prior to the bankruptcy of Recreation Corporation of America (RCA), Drexel Properties (Drexel), predecessor in interest to Petitioner Sheridan Ventures, Inc., engaged in negotiations with RCA and Fidelco Growth Investors (Fidelco) for the purchase of some eighty-three acres of land owned by RCA that was located in Hollywood and Dania, Florida. Fidelco held a mortgage on the property in the amount of $2,400,000.00. On January 20, 1976, a bankruptcy judge in the United States District Court for the Southern District of Florida issued an amended order in Case No. 75-16-BK-JE-H, authorizing the trustee in bankruptcy of the estate of RCA, bankrupt, to accept the offer of Drexel to purchase the trustee's equity in the real property of the bankrupt for the sum of $15,000.00, subject to the first lien of Fidelco, taxes, interest, certain
costs, and two subordinate liens in the amounts of $5,939.92 and $2,691.50. On January 28, 1976, the trustee executed a Bankruptcy Trustee's Deed conveying the property in question to Petitioner, subject to the Fidelco lien and taxes.
Petitioner recorded the aforesaid deed in Broward County on February 27, 1976, and state documentary tax stamps in the amount of $45.00 were paid. (Testimony of Mehallis, Exhibits 1-2, Exhibit D to Petition)
Respondent issued a proposed notice of assessment of documentary stamp tax, penalty, and interest in the total amount of $14,807.52 on September 7, 1976, based on a taxable consideration of $2,415,000.00. This sum represented the $15,000.00 cash paid by Petitioner and the $2,400,000.00 existing mortgage on the property. In this assessment, Petitioner was credited with the $45.00 previously paid for documentary tax stamps. An informal conference was held on September 21, 1976, after which a revised assessment in an increased amount was withdrawn when both parties agreed that the subordinate liens had been satisfied out of the $15,000.00 cash given for the deed. Subsequently, Respondent issued Revised Assessment No. 2, dated September 22, 1976, reflecting a sum due of
$7,653.30 payable for documentary stamp tax, a like sum as a penalty, and interest for six months and five days in the amount of $471.83, for a total of
$15,778.43. It was stipulated by the parties at the hearing that this amount is correctly computed and is the proper amount payable if the Petitioner is deemed liable therefor. (Exhibits A, C, E to Petition, Exhibit 3)
At the time Petitioner purchased the trustee's interest in the property, it had no intention of paying Fidelco's full lien because the amount of that mortgage exceeded the fair market value of the land. It intended to use the trustee's deed as a negotiating tool to get a better arrangement with Fidelco. Consequently, it made no payments on the mortgage and, on April 7, 1976, Fidelco filed foreclosure proceedings in the Broward County Circuit Court. Petitioner interposed set-off and a counter claim in an amount exceeding
$500,000.00 based on funds it had previously advanced to RCA under a prior contract. (Testimony of Mehallis)
A real estate appraisal of the property established its fair market value to be $1,120,000.00 as of January, 1976. (Testimony of Lukacs)
CONCLUSIONS OF LAW
Petitioner seeks to impose documentary stamp tax under subsection 201.02(1), Florida Statutes, which provides pertinently as follows:
"201.02 Tax on deeds and other instruments relating to lands, etc.--
On deeds, instruments, or writings whereby any lands, tenements or other realty, or any interest therein, shall be granted, assigned, transferred, or otherwise conveyed to, or vested in, the purchaser, or any other person by his direction, on each one hundred dollars of the consideration there for the tax shall be thirty cents. When the full amount of the consideration for the execution, assignment, transfer, or conveyance is not shown in the face of such deed, instrument, document, or writing, the tax shall be at the rate of thirty cents for each one hundred
dollars or fractional part thereof of the consideration therefor."
The Bankruptcy Trustee's Deed, coupled with the Order of the bankruptcy court, establishes that Petitioner purchased the land for $15,000.00, subject to the Fidelco lien, taxes, certain costs and two subordinate liens. In determining the "consideration" for the conveyance, upon which the tax is predicated, Rule 12A-4.12, F.A.C., provides that the term "consideration" under Section 201.02 includes (in subparagraph (2)(e)) "conveyance subject to mortgage debt, lien or encumbrance." Petitioner based its proposed assessment on a taxable consideration that included the existing mortgage of $2,400,000.00. Respondent contends that the mortgage sum is not the true consideration because the actual market value of the property is only $1,120,000.00. It predicates this argument on the theory that it did not assume any portion of the mortgage and, in fact, never intended to pay that amount, but only purchased the Trustee's Deed in order to use it as a negotiating lever to obtain a concession from the mortgagee.
When one takes a conveyance subject to an existing mortgage, he incurs an economic burden to the same extent as one who assumes and agrees to pay the mortgage. Kendall House Apartments, Inc. v Department of Revenue, 245 So 2d 221 (Fla. 1971); Florida Department of Revenue v. De Maria, 338 So 2d 838 (Fla. 1976)
The documentary stamp tax is imposed upon the document itself and the form and face of the document govern the taxability. The liability to pay the tax as well as the amount is to be solely determined by the form and face of the instrument and not by proof of extrinsic facts. State Department of Revenue v. McCoy Motel, Inc., 302 So 2d 440 (Fla. 1st DCA 1974) The face of the deed in question recited that the conveyance was subject to the Fidelco mortgage. Regardless of Petitioner's intentions not to pay the full mortgage sum, the fact remains that the mortgage is extant and Petitioner is subject thereto. It is therefore concluded that Petitioner is liable for documentary stamp tax, as assessed, in the amount of $7,653.30. Petitioner, having acknowledged that if liability is found, the amounts due are correct, and no objection having been raised at the hearing to the assessment of penalty and interest on the tax due under Chapter 201, these amounts are likewise found to be part of Petitioner's liability.
RECOMMENDATION
That Petitioner be held liable for the proposed assessment of documentary stamp tax, penalty, and interest under Chapter 201, Florida Statutes, in the amount of $15,778.43.
DONE and ENTERED this 28th day of April 1977, in Tallahassee, Florida.
THOMAS C. OLDHAM
Hearing Officer
Division of Administrative Hearings Room 530 Carlton Building Tallahassee, Florida 32304
COPIES FURNISHED:
Edwin J. Stacker, Esquire Assistant Attorney General Department of Legal Affairs The Capitol
Tallahassee, Florida 32304
Brian C. Deuschle, Esquire Spear, Deuschle and Curran, P.A. 5554 North Federal Highway
Ft. Lauderdale, Florida 33308
STATE OF FLORIDA
DIVISION OF ADMINISTRATIVE HEARINGS
SHERIDAN VENTURES, INC. )
)
Petitioner, )
)
vs. ) CASE NO. 76-1918
)
DEPARTMENT OF REVENUE, )
STATE OF FLORIDA, )
)
Respondent. )
)
AMENDMENT TO RECOMMENDED ORDER
It appearing that inadvertent errors were made in the use of the words "Petitioner" and "Respondent" in paragraph 1 of Conclusions of Law to the Recommended Order herein, dated April 28, 1977, the following paragraph 1 aforesaid is substituted as an amendment to the Recommended Order:
CONCLUSIONS OF LAW
Petitioner seeks to impose documentary stamp tax under subsection 201.02(i), Florida Statutes, which provides pertinently as follows:
"201.02 Tax on deeds and other instruments relating to lands, etc.--
On deeds, instruments, or writings whereby any lands, tenements or other realty, or any interest therein, shall be granted, assigned, transferred, or otherwise conveyed to, or vested in, the purchaser, or any other person by his direction, on each one hundred dollars of the consideration therefor the tax shall be thirty cents. When the full amount of the consideration for the execution, assignment, transfer, or conveyance is not shown in the face of such deed, instrument,
document, or writing, the tax shall be at the rate of thirty cents for each one hundred dollars or fractional part thereof of the consideration therefor."
The Bankruptcy Trustee's Deed, coupled with the Order of the bankruptcy court, establishes that Petitioner purchased the land for $15,000.00, subject to the Fidelco lien, taxes, certain costs and two subordinate liens. In determining the "consideration for the conveyance, upon which the tax is predicated, Rule 12A-4.12, F.A.C., provides that the term "consideration" under Section 201.02 includes (in subparagraph (2)(e)) "conveyance subject to mortgage debt, lien or encumbrance." Respondent based its proposed assessment on a taxable consideration that included the existing mortgage of $2,400,000.00 Petitioner contends that the mortgage sum is not the true consideration because the actual market value of the property is only $1,120,000.00. It predicates this argument on the theory that it never intended to pay that amount, but only purchased the Trustee's Deed in order to use it as a negotiating lever to obtain a concession from the mortgagee."
DONE and ENTERED this 6th day of May, 1977, in Tallahassee, Florida.
THOMAS C. OLDHAM
Hearing Officer
Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304
COPIES FURNISHED:
Edwin J. Stacker, Esquire Assistant Attorney General Department of Legal Affairs The Capitol
Tallahassee, Florida 32304
Brian C. Deuschle, Esquire Spear, Deuschle and Curran, P.A. 5554 North Federal Highway
Ft. Lauderdale, Florida 33308
Harry L. Coe, Jr. Executive Director State of Florida Department of Revenue
Room 102 Carlton Building Tallahassee, Florida 32304
STATE OF FLORIDA
DIVISION OF ADMINISTRATIVE HEARINGS
SHERIDAN VENTURES, INC. )
)
Petitioner, )
)
vs. ) CASE NO. 76-1918
)
DEPARTMENT OF REVENUE, )
STATE OF FLORIDA, )
)
Respondent. )
)
CORRECTED AMENDMENT TO RECOMMENDED ORDER
It appearing that inadvertent errors were made in the use of the words "Petitioner" and "Respondent" in paragraph 1 of Conclusions of Law to the Recommended Order herein, dated April 28, 1977, the following paragraph 1 aforesaid is substituted as an amendment to the Recommended Order:
CONCLUSIONS OF LAW
Respondent seeks to impose documentary stamp tax under subsection 201.02(1), Florida Statutes, which provides pertinently as follows:
"201.02 Tax on deeds and other instruments relating to lands, etc.--
On deeds, instruments, or writings whereby any lands, tenements or other realty, or any interest therein, shall be granted, assigned, transferred, or otherwise conveyed to, or vested in, the purchaser, or any other person by his direction, on each one hundred dollars of the consideration there for the tax shall be thirty cents. When the full amount of the consideration for the execu- tion, assignment, transfer, or conveyance is
not shown in the face of such deed instrument, document, or writing, the tax shall be at the rate of thirty cents for each one hundred dollars or fractional part thereof of the consideration therefor."
The Bankruptcy Trustee's Deed, coupled with the Order of the bankruptcy court, establishes that Petitioner purchased the land for $15,000.00, subject to the Fidelco lien, taxes, certain costs and two subordinate liens. In determining the "consideration" for the conveyance, upon which the tax is predicated, Rule 12A-4.12, F.A.C., provides that the term "consideration" under Section 201.02 includes (in subparagraph (2)(e)) "conveyance subject to mortgage debt, lien on encumbrance." Respondent based its proposed assessment on a taxable consideration that included the existing mortgage of $2,400,000.00 Petitioner contends that the mortgage sum is not the true consideration because the actual market value of the property is only $1,120,000.00. It predicates this argument on the theory that it never intended to pay that amount, but only purchased the Trustee's Deed in order to use it as a negotiating lever to obtain a concession from the mortgagee."
DONE and ENTERED this 10th day of May, 1977, in Tallahassee, Florida.
THOMAS C. OLDHAM
Hearing Officer
Division of Administrative Hearings Room 530 Carlton Building Tallahassee, Florida 32304
COPIES FURNISHED:
Edwin J. Stacker, Esquire Assistant Attorney General Department of Legal Affairs The Capitol
Tallahassee, Florida 32304
Brian C. Deuschle, Esquire Spear, Deuschle and Curran, P.A. 5554 North Federal Highway
Ft. Lauderdale, Florida 33308
Harry L. Coe, Jr. Executive Director State of Florida Department of Revenue
Room 102 Carlton Building Tallahassee, Florida 32304
Docket for Case No: 76-001918
Orders for Case No: 76-001918
| Issue Date |
Document |
Summary |
|
Apr. 28, 1977 |
Recommended Order
|
Tax land on face value, not on amount paid by Petitioner at bankruptcy sale.
|
